All the dollars in your HSA, including earnings generated on those dollars, are completely free of federal taxes and state taxes (for most states) while in your account. 

The only time tax is ever owed on principal or interest from your HSA is if the money is distributed for non-qualified expenses prior to your reaching age 65, becoming disabled or dying. Even if you use the funds for non-qualified expenses after you are 65 or disabled, you will only be subject to tax on the money you withdraw without the 20 percent penalty. You can always withdraw funds to pay for qualified medical expenses at any time without tax or penalty.

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